After the 2008 crisis, many observers expected changes of some sort in current economic thinking and academic teaching. After all, most mainstream economists never saw the crisis coming – with some even claiming the era of crises was over. For many non-economists, the crisis demonstrated once again the perils of economics, the “dismal science”. Eight years later we can say little has changed in economics since. Some will even argue that the current economic paradigms have in fact come back with a vengeance. The debates around austerity policies is but one example of this.
The new book by Rodrick can be described as an honest attempt to rescue economics from the bad place it seems to be today, especially in the eyes of non-economists. In his view for example the oversight of the 2008 crisis
No doubt economics has come a long way since the times of Adam Smith almost 250 years ago. If we were to summarize its dynamics of change, we could say that economics has moved from a broad political economy approach to a more narrow and now mainstream focus where mathematics seems to play a vital role. While the former also addressed social and political issues, the latter is much more constraint and centers on the economic sphere per se. This does not, however, mean that there are no other theories and schools of thought in between. On the contrary. But nowadays mainstream economics gets most of the coverage and, more importantly, provides the framework and concepts for implementing economic policies at the national and global levels.
That being the case, the evolution of economics has
Chaplin’s 1936 Modern Times, by now a classic of silent cinema, offers an inside glimpse of the automation of industrial production in the first part of the 20th Century. Our little tramp has somehow found a job in a factory, which is in the middle of an unspecified city, and spends his time doing the same minute but mechanical task over and over. As he is part of a much larger assembly line, there is no room for error – which, needless to say, is bound to happen, this being a Chaplin film after all. In any event, we can see the wonders of electro-mechanical automation accompanied by the dramatic reduction in skills workers needed to have back then to get a job in a factory.
32 years later, Kubrick’s futuristic 2001: A Space Odyssey depicted a very different kind of automation. Our main
Not without reason, Inequality seems to have taken command of most development, socio-economic and even political discussions. The fact that a supposedly “technical” and long (and excellent too!) book such as Piketty’s Capital in the Twenty-First Century became a best-seller of sorts last year is a good indicator of the relevance of this topic in our current historical juncture.
The focus of Piketty’s book is inequality regarding income and wealth. But it says little to nothing on the role new technologies can play in this evolution. The fundamental questions here are: is there a connection between the rapid growth of new ICTs and inequality? And if so, what is the role of ICTs in fostering or taming income and wealth inequality?
ICTs are indeed no strangers to inequality. Here, we can
“How Markets Fail: The Logic of Economic Calamities by John Cassidy is an excellent book that tackles the origins, impact and consequences of the recent economic crisis. It also provides a “What is to be done” (a la Lenin) in policy to avoid a repeat of the last crisis. The book is written in a clear and simple style. And Cassidy, not being an economist himself, has the ability to present almost any sophisticated economic theory in a fashion that is accessible to the general public.
The book has three distinctive sections which are related to each other. The first part of the book traces the evolution of the so-called “Free Market” theory starting with Adam Smith all the way to Robert Lucas. Cassidy clearly shows that 19th century free trade economist and philosophers were much more sympathetic
I just finished reading “The Origin of the Financial Crises” by George Cooper which was published last year. The book is subtitled Central Banks, Credit bubbles and the Efficient Market Fallacy which reveals right away the approach the author is will be taking.
This is an excellent book and a must read for anyone to wants to understand how financial markets worked until recently. It is written in a clear and simple style and has no equations or math (some do appear in a short annex). The author also provides a brilliant critique of the hard core free market approach that has reigned for the last 20 years or so. For example:
“The prevailing laissez-faire, efficient-market orthodoxy cannot explain the historical pattern of economic progress, nor can it explain the emergence of financial crises,
Although the root causes of the current financial and economic crisis are still being debated (and will continue until the next large crisis hits), one issue that stems out of of the current discussions is the softening in the last 20 or so years of government regulations in the financial markets. Starting with the Reagan administration and later complemented by the Clinton presidency, laws that were designed to “regulate” financial markets were eliminated in the US. This, combined with a push for innovation in the global financial markets, where new technologies were a key factor, and a “risky” monetary policy (continuous lowering of interest rates in the last 10 or so years), indicate that “governance” issues played a critical role in its onsetting.
In the last 40 years or so we have seen